So you’ve been making your monthly Chapter 13 payment and it hasn’t been easy. There isn’t a lot of wiggle room to begin with but some months have been better than others. Plus, you know you’re on track to save a lot of money by completing the Chapter 13 bankruptcy. Then life happens. It’s the loss of a job, unexpected medical situation or a variety of other reasons why you may not be able to afford your monthly Chapter 13 payment anymore. So what do you do?
When it comes to bankruptcy, it’s important to know the limitations of a bankruptcy. One area we occasionally have people ask about is whether they can file bankruptcy or not if they have a trust. To answer this question, yes; generally speaking, someone with a trust fund is more than likely able to file a bankruptcy.
There are two different types of trusts. There is a revocable trust and an irrevocable trust. A revocable trust is when the grantor (the person who created the trust and put property into it) of the trust has full access and control over the trust and at any given time can access the property in the trust. This is true only until the passing of the grantor. The beneficiary of the trust (the person that will receive the trust) is not able to control the assets of the trust until the grantor of the trust is deceased. Even then, the beneficiary may not have full control over what happens to the trust. This is due to there being provisions and rules associated with the trust that may limit what the beneficiary can do with the trust and the assets in the trust.
An irrevocable trust means the trust cannot be changed, and the assets in the trust cannot be accessed, without permission from the beneficiaries. This is because the grantor of the trust has given up their rights of ownership of the assets in the trust. The beneficiaries may not be able to access a trust instantly, but because the grantor has removed their ownership rights, the beneficiaries of the trust have some legal rights to those assets.
The main concern with trust funds is whether or not the trust can be protected from creditors. There are many allowances that will let you protect a trust. One of the most common allowances in the legal field is a “spendthrift” clause. A spendthrift clause can limit creditor’s claims to trust assets, regardless of whether the trust is revocable or irrevocable.
If you are a beneficiary or a grantor of a trust fund, and you are considering filing for bankruptcy, it is very important that you make your attorney aware of the trust. You should also have your bankruptcy attorney or trust attorney look over the trust and contract to be sure that it can be protected from creditors.
Errors in credit reporting can be detrimental to an individual’s financial health and stability. New lines of credit can be denied or offered at inflated interest rates because of incorrect negative information provided by even one of the three credit reporting bureaus. Some experts estimate that one in every four credit reports contains inaccurate information that could stop individuals from obtaining new lines of credit.
The first step to correcting inaccurate or outdated information on your credit report is knowing what creditors are seeing when they pull your information. While you can pay each credit reporting bureau a fee to see your report at any time, federal law requires that each bureau allow you to see your credit report for free once every 12 months. A website has been created to allow individuals to pull all three reports for free. AnnualCreditReport.com is one of the few places you can pull your credit reports without fear of having to pay anything. It is the site recommended by the Federal Trade Commission.
When inaccurate information is found, it must be disputed with each individual credit bureau that is listing it. If, for example, there is incorrect information on all three reports, it must be disputed with all three bureaus separately. If only one credit reporting bureau is showing misinformation, then only that bureau needs to be contacted.
To dispute anything on your credit report, gather any supporting documents you have as evidence. Write a letter to the credit reporting bureau explaining clearly what the inaccuracy is and provide the correct information so that the error can be corrected. The Federal Trade Commission has created a sample dispute letter that can be used as a guide. Attach your supporting documents to the letter to ensure that your complaint is addressed and corrected. We typically encourage folks to send these letters certified mail, return receipt requested, so you have evidence that you properly gave notice of any inaccuracies.
Each of the credit bureaus has set up a page on their websites to allow individuals to file online disputes. Access them here:
Once your complaint has been submitted, the credit reporting bureaus will investigate the inaccuracy, and will usually send a response in the mail no later than 30 days from the day that the dispute was submitted.
If you still are unable to have the improperly listed debt removed then you should contact the Federal Trade Commission to let them know of the improper reporting and the credit bureaus failure to properly remove the inaccuracy.
When you initially file a Chapter 13 bankruptcy your Trustee and creditors get a copy of a proposed plan. This tells the creditors how they are classified in the plan and how much you are estimating that they will be paid for the duration of the bankruptcy. Both the bankruptcy Trustee and the creditors have the option of reviewing the plan and either accepting or objecting to the plan terms.
Once you file your bankruptcy, your attorney is required to mail a copy of your proposed Chapter 13 plan to all of your creditors within 5 days from the date the case is filed. This gives everyone who is listed in the plan a chance to review how they will receive payment and whether or not they agree with the plan. If they do not agree with the plan, they have the right to file an Objection with the court stating their reasoning. At the 341 Creditor?s hearing (roughly a month after the case is filed), the Trustee will review your plan and have your attorney make any necessary amendments, if he agrees to the plan at that point, he will recommend confirmation.
Confirmation sets your plan in stone and is essentially put in place for your protection. Once your plan is confirmed, there is no changing it unless a Motion and Order is filed with the court. This prevents an unsecured creditor from coming up years later stating that they do not agree with the proposed payment.
What is that you ask? It is someone who ?guarantees? (hence the derivative ?guarantor?) to pay for someone else?s debt should they default on their obligation. It is quite like a co-signer but normally applies to business debt.
As you know, businesses come and go as the days go by. It is quite easy to open and close a business; and as many credit card and loan companies understand this, they will often have the owner of the company personally sign as a guarantor on the loan. This protects the creditor should the business close; this way even if the business itself is not open, there is still a live body that obligated to pay them their monies owed.
The good news is that if you have signed as a personal guarantor on a business credit card or loan and the business has closed, should you file a bankruptcy, you can include that business debt as part of your personal debt to relieve your personal liability on the debt owed. If the business is still open then the creditor has every legal right to go after the business for the debt owed, but not you personally.
In the State of North Carolina, foreclosure hearings are held by the Clerk of Court or Assistant Clerk of Court, as judges rarely hear foreclosures. The Clerk of Court is only to hear cases involving “legal defenses.” Cases involving any other type of defense, such as defense of fraud cases, are to be handled through Superior Court. This is due to North Carolina being a “Power of Sale” state.
There are three possible outcomes of a foreclosure hearing. The first outcome is that the Clerk of Court will deny the right to foreclosure. During a foreclosure hearing, a mortgage holder is required to prove four different components in order for the Clerk of Court to approve a foreclosure sale. Generally, the mortgage holder provides the Clerk of Court with documents supporting each of the four components. The four components considered at a foreclosure hearing are as follows:
1. Reasonable debt occupied by the mortgage holder or party seeking to foreclose.
2. Default on the debt
3. The right for the mortgage holder to foreclose based upon the deed of trust to the home
4. Notice of hearing was sent to the Debtor
If the mortgage holder does not prove the existence of the four components, the Clerk of Court will not approve the sale.
The second outcome of a foreclosure hearing is the Clerk of Court will issue a continuance. Under Section 45-21.16C of the General Statutes, the Clerk of Court may continue a foreclosure hearing up to 60 days. This could be due to the Clerk’s conjecture that the issue can be solved with time. For example, the Clerk may issue a 60 day continuance if the Debtor is in the process of working something out with the mortgage company. If the Clerk issues a continuance at a foreclosure hearing and the Debtor is present at the hearing, the Debtor will receive a written order from the Clerk stating the continuance.
The third outcome of a foreclosure hearing is the Clerk of Court will issue a “sale date”.
More than likely, the Clerk of Court will approve a foreclosure sale if the mortgage holder can prove all four components mentioned above. If a mortgage holder is able to prove all four components, the Debtor will receive a “sale date”, which represents the date at which the Debtor’s home will be sold. The sale date usually follows approximately 20 days after the foreclosure hearing. Once a Debtor receives a “sale date”, the Trustee, whom is listed on the deed of trust, will then post a “notice of sale” flyer at the county courthouse bulletin board in addition to sending notice to the borrower. They may also put the “notice of sale” in the upcoming newspaper.
Once the sale date has arrived, the State of North Carolina issues a ten day upset bid period. The ten day upset bid period allows for the filing of a bankruptcy within that ten day period in order to stop a foreclosure. If a bankruptcy is not filed before the sale date or during the ten day bid period, the Debtor will no longer own the property. If you have a foreclosure hearing or foreclosure sale date pending it is important that you immediately contact an experienced bankruptcy attorney to learn more about how you can save your home.
When the bankruptcy laws were reformed in 2005, one of the new requirements for some Chapter 7 cases was a “reaffirmation agreement.” A reaffirmation agreement is a document that is often filed in Chapter 7 cases. However, there are only certain circumstances when a Chapter 7 debtor should sign a reaffirmation agreement.
What is a reaffirmation agreement?
A reaffirmation agreement is a document that is signed by the debtor (the person who filed bankruptcy), the debtor’s attorney, and the representative for the creditor. The purpose of a reaffirmation agreement is to keep you (the debtor) liable for the debt you owe to that creditor, even though you are filing bankruptcy.
My mortgage company is saying I need to sign (or should have signed) a reaffirmation agreement for my mortgage/house.
If you have a house that you want to keep after your Chapter 7 case is filed, then you do not need to sign a reaffirmation agreement. The way the bankruptcy laws are written allows you to keep your house as long as you stay current on your monthly mortgage payments. In fact, in the Middle District of North Carolina (Greensboro, Winston-Salem, and Durham) the bankruptcy Judges do not allow reaffirmation agreements to be signed on mortgages unless there is a substantial change in the terms of the loan that are benefiting the debtor.
So in other words, even if your mortgage company is pushing you to sign a reaffirmation agreement, unless they are agreeing to change the terms of the loan under the reaffirmation agreement by changing the interest rate or monthly payment, then you cannot sign a reaffirmation agreement on your house.
If you’re reading this blog post the chances are good that you have a Facebook profile or account. If so, you’re not alone. Recent statistics reported by The Blog Herald indicate that there are now over 500 million Facebook users. Of those 500 million users, half of those users log in to their Facebook account every day. The average Facebook user has 130 friends and there are a staggering 30 billion pieces of content added each month. To fully understand that amount 30 billion looks like this when written out: 30,000,000,000.
So Why Does Facebook Matter to Your Bankruptcy?
Facebook is a window into your personal life. A bankruptcy Trustee, after filing bankruptcy, has the right and ability to look into that window.
When you file a bankruptcy you are required to disclose your assets and other important acts within certain time periods. If you fail to disclose the required information in your bankruptcy petition then you are committing a federal crime of perjury. You could face jail time and be fined large sums of money. Do I have your attention yet?
More and more bankruptcy Trustees are looking up debtors’ (people who file bankruptcy) social media accounts. It is so quick and easy to pull up information on social medias, it has become a logical part of the due diligence research that a Trustee’s office will complete.
Death Of A Bankruptcy Case Via Facebook
Let’s look at a common example. Husband and wife Donnie and Debra Debtors file a bankruptcy together. They fill out their bankruptcy petition and file it with the court. However, they chose not to list down some of their assets because they don’t want the courts to take it because they hope to give it to their children some day. Specifically, they don’t list down a 1957 Chevrolet Bel Air that has be restored and a whole life insurance policy with a substantial cash surrender value. Donnie and Debra show up to the creditors’ meeting and quickly realize they have some real problems.
Tom Trustee, who represents the people Donnie and Debra owe money to, has started paying a part time high school student to go online and after school and look up different debtors who have filed bankruptcy and see if they are showing assets that aren’t listed in their bankruptcy petition. Well, low and behold, the 16 year old high school student searching on Facebook has found some important information for the bankruptcy Trustee. Donnie and Debra have posted pictures on Facebook showing their newly restored 1957 Chevrolet Bel Air winning as “Best in Show” at a recent car show located in Charlotte, NC. In addition to that, Debra responded to one of her friend’s posts asking how to pay for college tuition by explaining that she and Donnie are withdrawing the cash surrender value from their whole life insurance policy to pay for their daughter’s freshman year in college.
Tom Trustee asks Donnie and Debra if they need to add anything else to their bankruptcy petition and they explain that it is accurate and complete. At that time, Tom Trustee begins to ask them about the assets not listed down in their bankruptcy petition, the car and whole life insurance policy. Stunned, Donnie and Debra first try to deny they have those assets but then the Trustee presents them with pictures printed off of their Facebook page. They eventually admit their failure to properly disclose assets.
Several weeks later Donnie and Debra are indicted and face federal charges of fraud and a fine of $150,000 by the federal government – money they don’t have because the Trustee seized both their “Best in Show” car and whole life insurance policy. Because Donnie and Debra didn’t tell their attorney about the assets they didn’t realize they could have protected both assets. The whole life insurance could have been fully protected because their children were the beneficiaries and the vehicle could have been exempted using a combination of their motor vehicle exemptions and “wild card” exemptions.
The Lessons To Be Learned
There are two important take-aways from this example. First, and most important, you should fully disclose your assets and be completely honest and forthcoming in your bankruptcy petition. The consequences of not doing so are not worth the perceived benefit. Second, tell your bankruptcy attorney about everything. Keep no secrets. If they would have discussed the concerns they had about their assets with their experienced bankruptcy attorney they would have known they could have protected their assets.
The Bottom Line: The purpose of this post is not to tell you to take hidden assets down but, instead, to encourage you to list the assets you have and discuss those assets with your bankruptcy attorney. Facebook and other social media sites are now used to confirm that you are being forthcoming within your bankruptcy petition.
If you file a Chapter 13 bankruptcy in the Middle District of North Carolina (Greensboro, Winston-Salem and surrounding areas), you will be required to have a phone interview with the Chapter 13 Trustee’s office.
You will need to call the Trustee’s office to schedule your phone interview. Be sure to call in on the date and time it is scheduled for – if you do not call for your phone interview, the Court can dismiss your bankruptcy case!
Submit the Necessary Documents
Another important note: the Trustee’s office cannot do the phone interview with you if they have not received all of the necessary documentation from you beforehand. It is important to submit all of the documents they have requested before the interview!
Review Your Bankruptcy Paperwork
The night before your phone interview, sit down with the copy of your bankruptcy petition you were given after your signing appointment. Remember: you came to our office for your signing appointment, we reviewed the petition together, and then we gave you a copy of the paperwork after the appointment was done.
During your phone interview, the staff from the Trustee’s office will be looking at the same paperwork that you have a copy of. You need to review it the night before just to refresh your memory on everything we reviewed together.
We Want Their Support, Be Nice!
The purpose of the phone interview is to review the file and ask you any clarification questions the court may have. Remember, our office has had a lot of interaction with you – we’ve asked you a lot of questions, received a lot of paperwork from you, and spent a lot of time with you. The only information the Trustee’s office has is the petition that was filed with the Court and the paperwork you submitted to them. It is important to be patient on the phone during the interview. They are asking questions so they have accurate information about your case. If you get frustrated or impatient, it will not help your case!
Ask Us Your Questions, Not the Chapter 13 Trustee’s Office
Finally, be sure to keep a note pad near you during the interview. If you think of any questions during the phone interview, jot them down and call our office afterwards to talk to us about your questions.